If you have a child with special needs, you probably have some unique concerns about the future. One, of course, is who will care for your child if you become unable to do so. Another is the cost of that care and who will pay for it. Here are some tips for creating a life insurance and estate plan that will help ensure your child is protected and cared for.
Set up a Special Needs Trust
Establishing a special needs trust helps formalize your decisions about your child’s care after you pass away, so those choices aren’t left to anyone else. A special needs trust provides for your child — the beneficiary. The funds in a special needs trust are allocated toward the cost of caregivers, education, travel and medical expenses not covered by Medicaid or other government programs.
Setting up these trusts can be complex. You’ll need to set them up correctly to meet your child’s unique needs. Special needs trusts must comply with state laws and government agency rules. There are also costs associated with establishing and managing the trust, which you’ll need to budget for properly. A lawyer can help you understand and set up a special needs trust, and manage it safely. An organization like the Special Needs Alliance can help with referrals to qualified attorneys.
Choose Your Trustee Carefully
You’ll need to designate a trustee to oversee the special needs trust, and that person pays service providers and other vendors directly from the trust for goods and services involved in your child’s care. They also decide how much money your child gets out of the trust.
Choose this person wisely — someone you trust who understands and is willing to accept the long-term commitment and responsibilities of being a trustee. Your lawyer should advise you and draft provisions in the trust for alternate and/or successor trustees.
Consider Life Insurance as a Way to Fund the Trust
You’ll want to set up the special needs trust so the assets are protected. If you fund the trust with stocks or mutual funds, the assets will be affected by ups and downs in the stock market.
As an alternative, you may want to consider life insurance. There are a few different types of life insurance. You should consult with an objective advisor to get a sense of which type might be best suited for your specific circumstances, goals and concerns.
Prepare Important Documents
You’ll want to prepare important documents so others can honor your wishes for your child’s care. These documents might include:
- A life care plan or letter of intent. This isn’t a legal document, but it’s important. It should include every aspect of day-to-day care requirements for your child, including dietary needs and restrictions. It should mention family dynamics that might make care challenging. These are instructions to family members, caregivers, guardians, trustees or anyone else who will be regularly involved in your child’s care.
- Beneficiary designations. If you set up any additional trust funds, make sure family members know who your other beneficiaries are so there’s no dispute about trust fund assets.
- Last Will and Testament. This is separate from the trust, but your lawyer should prepare it with the trust in mind.
- List of caregivers and successor trustees or guardians. These are people whose commitment you already have, in writing, to accept these roles.
Talk to your family members about the trust, the life care plan, and other important documents so they understand their roles. They’ll need the names and contact information of your attorney and trustees who aren’t family members. Be sure to tell these family members where they can find the documents you’ve prepared, too.
Planning for the future of your special needs child can be challenging. You can ensure peace of mind for you and your family by following these tips early and updating your care plan and other documents as needed.